MEXICO CITY (Reuters) - Mexican cement producer Cemex CMXCPO.MX on Thursday reported a rise of almost 8% in first-quarter profit, boosted by higher U.S. sales that helped it cushion the initial impact of the coronavirus pandemic.
Cemex’s net income rose to $42 million in the first quarter, from $39 million a year earlier, while total net sales increased 2% to $3.1 billion, the company said.
Monterrey-based Cemex, which operates in more than 50 countries, said it was deferring capital expenditure and cutting a percentage of employees’ salaries or allowances for a period of three months to save costs during the coronavirus outbreak.
“The world is going through an unprecedented time due to the COVID-19 pandemic. Construction activity across most of our markets is being impacted to varying degrees,” Chief Executive Fernando Gonzalez said in a brief statement.
Gonzalez added that the company is stressing health safety, including what he described as a “substantially low-touch experience” going forward.
U.S. net sales for the firm during the January to March period rose 13% to total $965 million, while volumes for its domestic gray cement and ready-mix cements grew by 10% and 9%, respectively.
“The strong results of the United States business in the quarter reflect the continuation of the demand momentum experienced in (the) fourth quarter coupled with better weather conditions,” Cemex said in a statement.
Earlier in April, the company said that it was targeting $200 million in cost savings in 2020.
Cemex executives told a call with investors they expected the cost of the firm’s debt to rise $25 million to $50 million in 2020 and that reducing the debt this year would no longer be possible.
The company said it had tapped $1.12 billion of a revolving credit facility and other credit lines in March to “strengthen our cash position,” and received a nearly $500 million payout from selling a cement plant in the U.S. state of Kentucky.
Cemex’s free cash flow after maintenance capital expenditures during the first quarter fell to a negative $276 million, the company added.
In Mexico, net sales fell 3% to $685.3 million, while sales also fell in its markets in South America, Central America and the Caribbean as well as Europe.
The cement maker’s gross profit in the United States rose by 20% to reach $231 million and increased in Asia, the Middle East and Africa, where net sales also rose slightly.
Subsidiary Cemex Latam Holdings (CLH) reported losses of $30 million in the first quarter, compared with a $16 million profit in the same period last year, as the coronavirus crisis hit.
CLH said in a filing to Colombia’s financial regulator its sales were down 11% between January and March to $214 million.
Reporting by Ankit Ajmera in Bengaluru and David Alire Garcia and Abraham Gonzalez in Mexico City; additional reporting by Nelson Bocanegra in Bogota, Editing by Shailesh Kuber, Steve Orlofsky, Jonathan Oatis and David Gregorio